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Maori and Pacific incomes still lag behind the national average, but a new spirit of Maori self-determination offers hope. Simon Collins reports in the first of a major four-part Herald investigation into closing our ethnic gaps.

New Zealand is still wasting its "demographic dividend" of young Maori and Pacific people reaching working age, as investments in health and education fail to flow through into highly paid jobs.

That's the conclusion Waikato University demographer Dr Tahu Kukutai draws from data showing that Maori and Pacific incomes still show no trend towards catching up with higher-paid Europeans, and that Maori and Pacific people have lost relatively more jobs in the recent recession.

The youthful Maori and Pacific populations make up almost 27 per cent of New Zealanders aged 18 to 24, compared with only 17 per cent of the older working age group aged 25 to 64 - giving New Zealand a demographic "dividend" that other developed countries with rapidly ageing populations don't have.

But 22.7 per cent of young Maori and 20.1 per cent of Pacific people aged 15 to 24 were not in employment, education or training (Neet) last year, compared with only 9.9 per cent of young Europeans and 5.7 per cent of young Asians.

Many others have gone to Australia. Despite offsetting immigration, last year's Census revealed that New Zealand's total population aged 25 to 39 dropped by 5 per cent between 2001 and 2013. The Maori population in that prime working age group dropped by 9 per cent.

A study of Australia's 2011 Census by Dr Kukutai and Shefali Pawar found that the Maori share of the NZ-born population in Australia rose from 13.8 per cent in 2001 to 17.1 per cent in 2011, higher than the 14.9 per cent Maori share of the population in New Zealand.

"There is a lot of unrealised potential, a lot of waste," Dr Kukutai says.

"The focus on closing the gaps tends to juxtapose groups in opposition to each other, but really what New Zealand has failed to grasp is that what's good for Maori is good for the country and that it's actually in the national interest that all those gaps that continue are remedied."

"Closing the gaps" has been an official policy at least since a 1998 report by the Maori development ministry Te Puni Kokiri first charted "Progress Towards Closing Social and Economic Gaps Between Maori and Non-Maori".

Incoming Labour prime minister Helen Clark made it a top priority in 1999, personally chairing a Cabinet "gaps" committee.

Although she later disowned the policy after it was attacked by National Party leader Don Brash in 2004, the Ministries of Health and Education in particular have continued to target reducing ethnic disparities. Later articles in this series will show that this has borne fruit in improving indicators such as infant mortality, life expectancy, early childhood education, senior school achievement and adults with degrees.

But these equalising forces have been outweighed by other changes that made New Zealand much less equal during the Rogernomics era in the late 1980s and early 1990s, when top tax rates were halved, welfare benefits were cut, employment laws halved unions' share of the workforce, and protection was removed from industries which employed many Maori and Pacific workers.

Maori employment dropped from 59.6 per cent of all Maori aged 15-plus in 1986 to 51.2 per cent a decade later. Pacific employment, which was actually higher than the European rate in 1986 at 66.5 per cent, plunged even more steeply to 51.8 per cent.

The two groups did better than average in the good times that followed, with employment rising to 61.6 per cent of Maori and 58.5 per cent of Pacific adults by 2006. But they have lost ground more heavily than average in the latest recession. Employment dropped to 57.3 per cent of Maori and 52.9 per cent of Pacific adults last year.

Otago University economist Dr Simon Chapple says the main effect of the recession was reduced new hiring, and Maori and Pacific people bore the brunt of it precisely because of their younger ages that were supposed to be a national "dividend".

Unless other policies change, perhaps the best hope for breaking out of that cycle is a new drive for Maori self-determination fuelled by long-delayed Treaty settlements. In the Far North, Te Rarawa leader Haami Piripi believes iwi will be "the major player in our local economy" within five years thanks to a $120 million Muriwhenua settlement due to pass through Parliament by August.

A Maori economic development strategy led by Ngati Kahungunu leader Ngahiwi Tomoana aims to close the national gap between Maori and average incomes by 2040 through education, increased financial literacy and savings, developing land and natural resources, and working together as "Maori Inc".

Mr Tomoana says mainstream education has failed Maori, but Maori-language schools are more successful and charter school funding offers hope. "We have just done an analysis of Maori-language kura [schools] and wananga [universities] and found the outcomes are far in excess of expectations, with some of the top achievers in the country."

He has also been on several Maori trade missions to China and found that Maori language helped to connect with Chinese traders, drawing on Maori ancestral links with China.

"In the next five to seven years you are going to see some real exponential growth in the Maori export sector."

Living a daily battle for Pacific workers

"This is our living space at the moment," says new dad Tali Harrington, indicating the small bedroom he lives in with his wife Joan and their 4-month-old baby Leila.

They share a six-bedroom Mangere state house with Harrington's mum, his two brothers and sister and their spouses and children and four other nephews and a niece - 17 people in all.

"It's quite stressful for us," says Niue-born Harrington. "I need a healthy environment for my daughter, because a lot of them are smokers."

But a house of their own is impossible on Harrington's wages. He earns $14.10 an hour in his main job cleaning a wananga for 22 hours a week, and $15.75 an hour as the supervisor in another cleaning job.

Pacific workers like Harrington are our lowest-paid ethnic group with an average wage last year of $20.59 an hour, behind Maori on $22.45, Asians on $23.49 and Europeans on $27.08. That wage gap has hardly budged in a decade. Pacific workers averaged 25 per cent below Europeans in 2004 and 24 per cent below Europeans today.

Harrington's cleaning company wins business by offering to do each job not just for low pay but faster than competitors.

"We can't do it in the hours they've given us," he says. They are supposed to finish the wananga job at 1.30am but sometimes have to work until 4am to finish it.

"They don't pay the overtime. We are entitled to it but we always have to fight for it," he says.

The Government will give Harrington a modest bonus when the legal minimum wage rises on April 1 from $13.75 to $14.25 an hour, but he supports his union's campaign for a true "living wage"of $18.80 an hour.